Malaysia: Embracing Abe-san and Bro Modi


August 1, 2018

Dr. Mahathir’s Look East (Japan) and West (India) Geo-Economics–Embracing Abe San and Bro Modi

by Dr. Shankaran Nambiar, MIER

http://www.eastasiaforum.org/2018/07/13/mahathirs-foreign-policy-reset/

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Malaysian Prime Minister Dr.Mahathir greets Bro Modi

Prime Minister Mahathir Mohamad appears to be setting the tone for a revision of Malaysia’s geo-economic policy, if the bilateral meetings with his Indian and Japanese counterparts in the early days of his administration are anything to go by. 

 

Indian Prime Minister Narendra Modi called on Mahathir not too long after the latter assumed office. The meeting was significant in so far as Modi is keen on ‘Acting East’ and forging stronger ties with ASEAN. With Mahathir at the helm, Modi may well have an active and influential partner in the region.

India is likely to be an economic powerhouse in the coming decade or two, and any long-term economic architecture in the region will have to take this reality into account.

Does Mahathir run the risk of disrupting Malaysia’s economic relations with China by engaging with other partners? Not quite, but he does want to tilt the balance.

Mahathir is not questioning China’s intention to build friendly, harmonious and prosperous relations with the region or with Malaysia. But he is adding a dose of reality to some of the more questionable investment agreements that Malaysia has entered into with China and wants these deals to be reviewed. Mahathir has said that ‘we will be friendly to China but we don’t want to be indebted to China’.

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With Ali Baba’s Jack Ma of China

The Prime Minister is keen to do business with anyone who means business, provided there are no hidden caveats and Malaysia is not compromised. If there was any question of wanting to cut off China, Mahathir would not have met with Chinese entrepreneur Jack Ma.

This brings us to Mahathir’s meeting with a second foreign leader, Japanese Prime Minister Shinzo Abe. Why did Mahathir choose to go to Japan on his first official overseas trip soon after he came to power?

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Teaming with Abe-San on Look East Partnership with No.7 Jersey

Mahathir probably sees value in reviving his ‘Look East’ policy, which he pursued while prime minister in the 1980s, perhaps in a different form and for slightly different reasons. There is an element of nostalgia, to be sure. But Mahathir is not is not a sentimentalist.

The previous Najib administration did not treat the notion of equidistance from global superpowers with the sensitivity it deserved. There was a tumbling over to China coupled with a reticence to engage with Japan, at least with nothing of the enthusiasm that Tokyo enjoyed during the Mahathir 1.0 era.

Mahathir has always believed in maintaining equidistance from other powers, preferring to work with the larger economies as equals. Mahathir would, by logical extension, be willing to cooperate with China’s Belt and Road Initiative as long as the partnership is fair and without Beijing using Malaysia as its playground. In that respect, reaffirming Malaysia’s long friendship with Japan is a reassertion of Mahathir’s pragmatic approach to geo-economic policy.

But equidistance is not possible without the existence of something like the Non-Aligned Movement. In lieu of that, Mahathir will likely pursue equidistance through a more integrated ASEAN in partnership with other countries such as the United States, China, Japan, South Korea, India and the Central Asian states. This would be a revival of his East Asian Economic Caucus (EAEC) concept.

A close-knit ASEAN, through the EAEC, would be able to give countries such as Malaysia more access to foreign markets without having to pay an onerous price for doing so. It would allow countries like India to trade and invest in Southeast Asia or other places while being able to show their home constituencies that they can make gains without paying for them with tough commitments.

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Strengthening ASEAN’s economic cohesion and including other powers through the EAEC would mean that neither the United States nor China could dominate Malaysia’s foreign policy. Malaysia would not have to choose between aligning with either power.

Mahathir’s discussion with Jack Ma after his India and Japan meetings shows the Prime Minister’s pragmatism — more than being caught up in great power politics, Mahathir wants to push ahead with attracting no-strings-attached investment, be it from China, India or any other part of the world.

Mahathir understands that trade and investment are Malaysia’s lifeblood. Improving Malaysia’s networks with the rest of the world’s markets must take top priority to foster better trade and investment connections.

Mahathir’s meetings with Modi and Abe will set in motion a couple of initiatives. Malaysia will return to its default position of maintaining equidistance between superpowers. Japan will not feel it is being edged out of Malaysia’s investment landscape.

Malaysia will stand for a free and unaligned ASEAN, with Mahathir leading a campaign for a new trade architecture that might be more palatable to Southeast Asian countries  and which will minimise the conflicting demands of China, the United States and India by embracing Japan.

Of course, the EAEC idea will have its share of detractors and non-adherents. Much as Mahathir has a tough job setting domestic affairs right now, he has the no less difficult task of realigning the country’s geo-economic policy.

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Shankaran Nambiar is a senior research fellow at the Malaysian Institute of Economic Research.

A version of this article originally appeared here in The Sun Daily.

The Domestic Political Impact of Rapid Economic Change in the Indo-Pacific Region


July 25, 2018

The Domestic Political Impact of Rapid Economic Change in the Indo-Pacific Region

by Ellen Frost

Asia Pacific Bulletin, No. 426

Publisher: Washington, DC: East-West Center
Available From: July 11, 2018
Publication Date: July 11, 2018
Binding: Electronic
Pages: 2
Free Download: PDF

 

Ellen L. Frost, Senior Advisor and Fellow at the East-West Center in Washington, explains that “A key question is whether the strategies employed by current Indo-Pacific governments are working well enough to be both competitive in the new regional economic environment and responsive to legitimate grievances at home.”

 Structural changes in the external economic environment have a profound and complex impact on the distribution of power and wealth among and within national societies. They mobilize new actors, influence the content of domestic and foreign economic policies, and ultimately contribute to–or erode—the legitimacy of national governments.

Nowhere in the world are these impacts more visible and more dynamic than in the nations of the Indo-Pacific, many of which will hold elections within the next year. These challenges are not new, but they have intensified. Beginning in the 1980s, the revolution in communications technology and the advent of large-scale container shipping swept across East and Southeast Asia, connecting people and markets as never before. In the 1990s, burgeoning production networks linked the more competitive and investment-friendly developing economies—such as Singapore, Thailand, Malaysia, South Korea, and Taiwan—with world markets, leaving more closed economies such as Laos, Myanmar, and India lagging behind. Market-opening in China fueled spectacular rates of growth, lifted millions out of poverty, and enabled the country to become not only an assembly nexus and production hub but also an assertive regional power.

Regional economic integration has become a dominant feature of today’s Indo-Pacific. All governments are committed to promoting closer economic ties with each other, whether half-heartedly or not. Integration is inching along, gingerly encouraged by governments but driven more powerfully by pressure from the private sector and from ocean-facing local governments. Trade-liberalizing agreements, though imperfect and limited, are the new norm. Negotiations spearheaded by the Association of South East Asian Nations (ASEAN) have made some progress. Despite the Asian financial crisis of 1997-98 and the U.S.-origin global recession of 2008-09, no government in the Indo-Pacific region has rejected the rules embodied in the World Trade Organization (WTO) or retreated from its slow and uneven march toward more open markets.

Indo-Pacific governments that signed on to the high-standard Trans-Pacific Partnership (TPP) agreement—Brunei, Singapore, Malaysia, Vietnam, Australia, and New Zealand—remain committed  to improving the protection of intellectual property and tackling other behind-the-border measures that impede trade and investment, with or without the United States. Promoting the transition to a digital economy is likely to gain more prominence next year, when Thailand takes over the chairmanship of ASEAN. Meanwhile, negotiations on a less demanding, ASEAN-sponsored Regional Comprehensive Economic Partnership (RCEP), which includes India as well as Australia, and New Zealand, continue to inch along.

Even India has embraced closer integration, as emphasized most recently by Prime Minister Modi at the June 2018 Shangri-La Dialogue. India’s economic reform is lagging, but its high growth rate, relatively low level of public debt, and youthful population have attracted an upsurge in foreign investment. The Modi government’s outward-looking strategic awakening is gradually improving relations with nations bordering the Bay of Bengal and the Indian Ocean littoral, thus facilitating closer integration. But the combination of India’s federal system, local politics, corruption, and remnants of the “license raj” has thus far thwarted wide-ranging economic liberalization.

Domestic Aspects of Regional Integration

The upsurge in Indo-Pacific economic integration has spawned a rising middle class whose members have embraced the choices available in the regional (and global) marketplace. Urban dwellers in particular have become used to higher standards of living, more consumer choice, and a wide spectrum of social media. Thousands of Asians have found employment in foreign firms or joint ventures, while others have lost their jobs. What Karl Marx and others called the “comprador bourgeoisie”—local agents or managers working for foreign entities—has emerged as an educated political class with a major stake in regional integration.

Many provincial and urban authorities have developed close ties to their nearby counterparts across borders, particularly in mainland Southeast Asian countries bordering on or close to China (Myanmar, Laos, Vietnam, and Thailand). Small- and medium-size companies and local enterprises account for a growing share of China’s overseas investment. All of these groups have acquired a stronger political voice.

China    

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Overshadowing all this activity is the sheer weight of China. China’s economic growth and central role in production networks have made it the number-one or number-two trading partner of virtually all countries in the East and Southeast Asia regions. Some smaller nations have found a niche in China-centered manufacturing networks, while others have boosted their sale of commodities and raw materials. China’s Belt and Road Initiative and the China-sponsored Asian Infrastructure Investment Bank will spur badly needed development of Indo-Pacific infrastructure and connectivity. Local interest groups have sprung up accordingly. For all of these reasons, most Indo-Pacific governments feel compelled to maintain friendly relations with China.

Dependence on China comes at a price, however. Huge loans for infrastructure projects can feed large-scale corruption and saddle poorer countries with unsustainable debt. To enforce its geopolitical agenda, Beijing is increasingly resorting to coercive economic statecraft (“sharp power”), including surprise “inspections” and delayed approvals, selective boycotts, and limits on tourism. Chinese companies investing in Indo-Pacific countries typically import large groups of Chinese workers to perform jobs that might otherwise go to local laborers. The militarization of islands claimed or created in the South China Sea has gone unchecked, spurring criticism in rival claimants.

Challenges Facing Indo-Pacific Governments

“Governments that fail to reform the structure of their economies risk falling even further behind in the regional marketplace, but those who neglect their most vulnerable citizens may be voted out of office—or overthrown.” –Ellen Frost

A number of major threats to integration, growth, and political stability in the Indo-Pacific region are beyond national governments’ control. They include financial volatility, cyber crime, terrorist attacks, refugee flows, fluctuating commodity prices, rising sea levels, severe storms, and other natural disasters. Grievances and conspiracy theories proliferate via social media. Manufacturing breakthroughs such as 3-D printing may localize or otherwise shrink the regional supply chains in which many Asians have found a profitable niche. Growing income inequality is also a threat; when those left behind come from a neglected or persecuted ethnic or religious group, the result can be highly destabilizing.

The latest threat to Indo-Pacific prosperity—and indirectly to regional integration—is the outbreak of protectionism and populist nationalism in the United States. The Trump administration’s “America First” campaign may well divert investment away from the Indo-Pacific and into the United States. Indeed, that is an explicit U.S. policy goal. As regional integration stalls, domestic interest groups with a stake in the expanding regional economy and others with previously high expectations may turn against established governments.

Electoral Prospects: Finding a Balance

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Upcoming elections in Bangladesh, Bhutan, Cambodia, the Philippines, Indonesia, Thailand and India (including Indian states), scheduled for 2018 or 2019, will put the leaders of these countries to the test. Governments not facing challenges from the ballot box will feel pressure from their citizens as well. Some of the likely issues will be linked to or exacerbated by the evolving external economic environment, such as large-scale corruption in the infrastructure sector, widening income gaps, unwelcome Chinese activities, and worker layoffs in non-competitive sectors.

A key question is whether the strategies employed by existing Indo-Pacific governments are working well enough to be both competitive in the new regional economic environment and responsive to legitimate grievances at home. Governments that fail to reform the structure of their economies risk falling even further behind in the regional marketplace, but those who neglect their most vulnerable citizens may be voted out of office—or overthrown.

https://www.eastwestcenter.org/publications/the-domestic-political-impact-rapid-economic-change-in-the-indo-pacific-region

Foreign Affairs: Time for East Asia


July 9, 2018

Time for East Asia

By Bunn Nagara@www,thestar.com.my

READ : https://asia.nikkei.com/Spotlight/The-Future-of-Asia-2018/Mahathir-revives-Look-East-policy-to-join-ranks-of-economic-giants

AS an indication of how out of touch some international pundits of Asia are, they still call North-East Asia (China, Japan and Korea) “East Asia.”

East Asia as a region comprises the sub-regions of North-East Asia and South-East Asia, the latter being the countries of ASEAN and Timor-Leste.

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The ASEAN region developed steadily with peace and prosperity as its watchwords. It became known as a region consistently posting some of the highest growth rates in the world.

Yet ASEAN and its member countries were severely constrained by a lack of economic weight and global reach.

ASEAN’s diplomatic clout is fine, but South-East Asia as a region falls short of economic heft in a rapidly globalising world. Nonetheless, the forces of globalisation themselves would take care of that with growing economic integration within East Asia.

North-East Asia included two of the world’s three largest economies, so as a region it had no problems of limited reach or heft. Despite global constraints, China on the whole continued to grow.

As the economies of North-East Asia and South-East Asia grew more integrated, growth in East Asia as a whole would soon reach an altogether different plane.

Studies generally find intra-regional trade surpassing foreign direct investment (FDI). A 2009 study found that tariff reductions as well as closer monetary cooperation among East Asian countries made sense.

A report by the Asian Development Bank Institute last year acknowledged the impressive growth of East Asia’s intra-regional trade ratio over the past 55 years.

It noted how trade had become “more functionally linked to international production networks and supply chains” as well as FDI in the region. This is indicative of East Asia’s deepening regionalisation. Typically, after Japan’s export of capital to South-East Asia in the 1970s and 1980s, China took up the slack as Japan’s economy leveled off from the early 1990s.

In 1990, ISIS Malaysia and Prime Minister Tun (then Datuk Seri) Dr. Mahathir Mohamad worked on a proposal for an East Asia Economic Grouping (EAEG). It was time for East Asia to come into its own.

When Chinese Premier Li Peng visited Kuala Lumpur in December 1990, Dr Mahathir proposed the EAEG to him. Li Peng accepted and supported it.

The idea had not been discussed within ASEAN before. Indonesia, the biggest country and economy regarding itself the region’s “big brother,” felt miffed that it had not been consulted about the plan.

Singapore’s position, traditionally more aligned to a US that was not “included” in the East Asia proposal, was slightly more nuanced. Lee Kuan Yew, upon becoming Senior Minister just the month before – and on the cusp of the Cold War’s demise – still preferred an economic universe defined by the West.

At the time this was the European community and the Uruguay Round as an outgrowth of the General Agreement on Tariffs and Trade (GATT).

It was still three years before the European Union (EU), and four years before the North American Free Trade Agreement (NAFTA).

Generally the world was still beholden to Western economic paradigms and game plans. The EAEG was thus seen as the work of some upstart Asians, in turns brash and occasionally recalcitrant.

Most of the six ASEAN countries, like South Korea, accepted the EAEG even as they tried to learn more about it. But it was still at best tentative.

The EAEG’s critics, however, proved more vocal. US President G.H.W Bush and Secretary of State James Baker wanted to crash the regional party by becoming a member also, or else would see the idea crash.

The Uruguay Round was then seen to be quite rudderless, and APEC, itself formed just one year before, appeared fumbling in the doldrums.

The EAEG, misperceived as an “alternative”, would be thinking and acting outside the box. An energised Asia owing nothing to Western patronage was far too much for an Occidental-conceived world order to contemplate, much less accept.

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Prime Minister Hun Sen and China’s President Xi Jinping

Malaysia tried to soothe anxieties about the EAEG by emphasising its soft regionalism. It was to be only “a loose, consultative” grouping and no more.

Why should a booming, rapidly integrating East Asia be deprived of a regional economic identity, when Europe and North America could develop their own?

Unfortunately the EAEG’s public relations campaign proved too little too late. The idea, albeit now conceived as an ASEAN project, lacked traction and ground to a halt.

Singapore saw its merits and tried a different tack. Prime Minister Goh Chok Tong proposed an East Asia Economic Caucus (EAEC) within APEC, allaying fears of an insecure US that this would remain within the ambit of a US-dominated APEC.

Several political speeches and conference papers later, the EAEC idea also failed to germinate. A Bill Clinton Presidency was lukewarm-to-cool to the idea, still without the encouragement Japan needed for a nod.

A flourishing East Asia would be left without a regional organisation of its own, again.

In 1997 the devastating Asian economic and financial crisis struck, hitting South Korea, Thailand and Indonesia particularly badly. If the EAEG had been in place by then, greater regional cooperation and coordination would have helped cushion the shocks.

Suddenly, South Korea took the initiative to push East Asia into forming a regional identity: ASEAN Plus Three (APT). This grouping would consist of the same EAEG countries.

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Indo- Pacific Partnership –An Alternative to China’s One Belt One Road Initiative (BRI)

Japan this time was more accommodating, and the APT was born.

For decades, “the West” led by the US was identified with open markets and free trade. But now a Trump Presidency deemed protectionist, even isolationist, is hauling up the drawbridge and raising the barricades with tariffs and other restrictive measures.

These are aimed at allies and rivals alike, whether in Europe or Asia. Equivalent countermeasures have been launched, and the trade-restraining spiral winds on.

China, by now identified globally as a champion of open markets and free trade, has called on Europe to form a common front. Strategic competitors are making for strange trade bedfellows and vice-versa.

Dr Mahathir was on his annual visit to Tokyo last month for the Nikkei International Conference on the Future of Asia. He duly revisited the idea of an East Asian economic identity and community.

For emphasis, he added that he preferred this to a revised Trans-Pacific Partnership that the US has now rejected. How would an EAEG now play in today’s Japan and East Asia? More to the point, how would it play in Washington? The answer may still determine its prospects in Tokyo and East Asia as a whole.

It is possible that the US has become too tied to the idea of battling trade skirmishes, if not outright trade wars, with any presumed adversary to have time to frown on an EAEG.

Dr Mahathir has noted how this is the time for such a regional grouping, since we still need it and particularly when the US is helping to justify it. It is also conceivable that Japan today is more open to the EAEG, just like with the APT post-1997.

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America First Fallacy– In fact it is US retreat from global engagement

 

The more the rhetoric of a US-China trade war rages, the more likely East Asia can finally develop a regional economic identity of its own.

Even a US-EU trade conflict will do. East Asia should not be too choosy about its benefactors.

Bunn Nagara is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia.

Bunn Nagara

Can Japan learn from Malaysia too?


June 30, 2018

Can Japan learn from Malaysia too?

Yes, Kim Beng, what you say resonates with me. We can share our experiences and also learn from one another. What we need is  a clear heart, an open mind and lots of humility. It is not about America First or building Fortress America. It is about our capacity and willingness to learn from one another. We must first understand that we are not islands unto ourselves.  Why look EAST only? Look everywhere.  I welcome comments.–Din Merican

COMMENT | Japan, unknown to many, is a hybrid. It has an imperial system steeped in ancient Japanese culture and Shinto religion. But it also has a Whitehall parliamentary system, and a bureaucracy that recruits on the basis of what top universities like University of Tokyo, Waseda University and Tokyo University of Foreign Studies can produce. The latter is not unlike the practice of France that tends to pick its best elites from ENA (or Ecole Nationale Administration), indeed, also Sciences Po.

More importantly, Japan has a security alliance with the United States, that is predisposed to relying on the nuclear deterrent provided by Washington DC, even though Japan purportedly cannot house, base and allow any nuclear warships to traverse through its ports, according to the doctrine once laid down by Prime Minister Eisaku Sato.

Yale historian,Paul  Kennedy. who wrote the book ‘The Rise and Fall of Great Powers’ in 1988, referred to Japanese foreign policy as “omnidirectional.” Neither East nor West, Japan is the best – only that the so-called definition of the “best” in Japan involves a high degree of adaptation, adjustment and innovation to suit Japan.

By anecdotes, none of the anime characters, for example, are truly Western. Not even Eastern. But the end product is a Japanese anime that is imbued with huge eyes, sharp features, and accentuated shapes, all of which have been innovated to achieve that distinctive flavour that only anime fans can associate with.

But even as Malaysia Look East, what can Japan learn from Malaysia though? It is high time that Tokyo looks at Malaysia (anew) for three specific reasons.

First, at a fertility rate of 1.34 according to the UN Population research, as reported in NHK, Japan is greying and shrinking in future. Japan is growing older, and in human demography, smaller. Second, Japan has a serious security problem viz a viz North Korea and China. Both countries may want to trade with Japan, even ultimately gain from it, but they are not in a position to let Japan off lightly on historical issues, especially Japan’s previous colonisation of them.

Thirdly, the aging of Japanese society has repercussion in terms of its security outlook and posture too, even democracy. As the people become older, they demand Japan be a responsible power, too, one that can stand up on consistent Japanese principles of honour, dignity and values, all of which play into the hands of the right-wing political elements who may argue that ancient Japanese values are strongest in right-wing parties. If this is the trajectory, Japanese politics would turn right even before it can become centrist, let alone leftist in future.

But, regardless of the permutations above, Japan can learn from Malaysia in terms of our democratic experimentation and consolidation too. At the ripe old age of  93 in a couple of weeks – Dr Mahathir Mohamad has shown that “age is a number” – one can be a democrat if one is committed to it. Indeed, Prime-Minister-in-Waiting Anwar Ibrahim, too, is already 71.

In his speech in Istanbul on June 19, Anwar explains that he is not young too. But he is vested his life into promoting and protecting democracy by virtue of the political imprisonment that he had gone through, causing him to lose 10.5 years of his life in prison. In the outlook of Mahathir and Anwar, age is not a factor in reeling back from pursuing peace, freedom and democracy, which are lessons that the whole of Japan should be learning from Malaysia. Old is gold.

More importantly, while close to four million Malaysian youths did not register to vote in the 14th General Election, the total voter turnout was 82 percent, just four percent less than 2013. The ones who voted out the kleptocratic excesses of the government of Najib Razak were the youth too. In fact, 75 percent of the membership of Bersatu, a party led by Mahathir, is less than 35 years of age.

Syed Saddiq Syed Abdul Rahman, a top youth leader of Bersatu, even gave up his Oxford graduate scholarship twice to fight for a better Malaysia. One of Mahathir’s top strategists, Dr. Rais Hussin, is barely 50. But he fought against all odds to defend the Malaysian democracy, and recruited the likes of Dr. Maszlee Malik, his peer in International Islamic University, to be the education minister.

Women’s power

Japan can also learn from Malaysia in terms of the women participation. Prior to May 9, which was the day of the electoral upset, seven out of 10 female voters in Malaysia were usually pro-establishment.

But on the day of the election, the women refused to go with the systemic abuses and flagrant corruption of Najib and his wife Rosmah Mansor). Many rooted for Mahathir and Dr. Wan Azizah Wan Ismail, the wife of Anwar Ibrahim. Wan Azizah, who is an eye specialist is now the deputy prime minister. Words have it that the speaker or the deputy speaker of the parliament could be Hannah Yeoh, again, another woman.

Fourthly, the Malaysian election is establishing the norm to help China understand that “lopsided agreements,” and “uneven contracts,” the likes of which have been seen not only in Malaysia, but throughout the international trading system spanning from Asia to Latin America.

These agreements have to be thoroughly reviewed. Malaysia does not want any bad relationship with the world’s largest market, as that as would be the equivalent of practising destructive trade practices. But Malaysia is an emerging trading nation that merely broke into the top 20 trading nations of the world only in the last 20 years.

Malaysia cannot squander away the hard work and labour of the previous generations while allowing another economic juggernaut to walk over us. This is how Malaysia has reacted to the United Kingdom in 1982 with the “Buy British Last” campaign. Back then, Malaysian government merely wanted the fees imposed on Malaysian students to be reduced so that more Malaysian students can benefit from the necessary academic training and skills transfer.

When then prime minister Margaret Thatcher, herself a tough negotiator, refused to relent, Malaysia had no choice but to diversify the number of locations the Malaysian government can send its students abroad. Malaysia is not about to impose any protectionist measure on China. But improper and suspicious trade agreements involving China and the previous regime have to be reviewed with a fine-tooth comb.

Indeed, there may not be a one-to-one analogy between Malaysia of the past and now, even though the administration is once again back in the hands of Mahathir. But there are many things that Japan can learn from Malaysia. Just because Japan is a member of the G7 while Malaysia is a member of Asean, the latter must learn from the former. As Malcolm Gladwell the author of ‘David vs Goliath’ made plain – small does not mean weak; silence too does not mean consent.

On May 9, Malaysians staged a strategic electoral upset quietly and deftly, precisely because Malaysians at large have given more than enough chances to Umno and BN to reform themselves. They didn’t. Hence, what happened on May 9 was a reformation pioneered by the likes of Anwar and subsequently led by Mahathir when the former was still under imprisonment. With good coordination and partnership, Pakatan Harapan achieved the impossible.

Japan, being a country based on creating new breakthroughs, should take Malaysia as a major democratic breakthrough, and a shiny example of what peaceful transition of power can achieve.


PHAR KIM BENG is a Harvard/Cambridge Commonwealth Fellow, a former Monbusho scholar at the University of Tokyo and Visiting Scholar at Waseda University.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

ASEAN Car, National Car and What else–Let’s Get Real, not Sentimental


June 29, 2018

ASEAN Car, National Car and What else–Let’s Get Real, not Sentimental

by Bunn Nagara@www,thestar.com.my

The international marketplace can be an unforgiving arena, if the hard economic realities of global markets are replaced by sentimentality or nostalgia. 

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A “national car” in Vietnam or Malaysia tends to miss the wood for the trees. Larger regional realities determine the local prospects, not the other way round. All goods and services are subjected to tough market realities.–Bunn Nagara

THERE is a pattern and a rhythm in global markets that, when acknowledged and heeded, can yield profits – but when denied or confronted may lead to loss and pain.

Asia’s two largest economies, China and Japan, are set to face off in South-East Asia in at least one sector: automobiles.

The signs of this looming challenge are becoming observable, as the portents of the rivalry settle steadily into place. A “national car” in Vietnam or Malaysia tends to miss the wood for the trees. Larger regional realities determine the local prospects, not the other way round. All goods and services are subjected to tough market realities. A temporary reprieve may come only with costly subsidies or tariffs which then render items uncompetitive over the longer term.

Among the realities of the global auto market are, first, that the motorcar is the single most costly consumer item commonly sold across borders. Second, of all the global consumer items traded daily, the car is probably the least nationally oriented. Parts come from all over the world, plants are established abroad for cost and other reasons, and companies from abroad buy proud “national” firms producing even the most prestigious brands.

Britain’s Jaguar Land Rover was bought by America’s Ford, and then by India’s Tata. Britain’s most prestigious marques, Rolls Royce and Bentley, were bought by Germany’s Volkswagen which also bought Italy’s supercar Lamborghini and France’s pride Bugatti, besides Spain’s Seat and Czechoslovakia’s Skoda.

Lamborghini was previously taken over by the Swiss (Mimrans), then the Americans (Chrysler), and then Indonesians (V’Power) and Malaysians (MyCom).

China’s Geely bought Sweden’s Volvo, the London Taxi Company, Germany’s prestigious Daimler (Mercedes) Benz, the US “flying car” company Terrafugia – and Malaysia’s Proton and Lotus.

Proton had earlier acquired Britain’s iconic sports car company, Lotus. Ownership “promiscuity” in the auto industry across borders is spread all round.

Some of these acquisitions may not be 100% but they are still substantial. Geely, for example, owns 49.9% of Proton and 9.69% of Benz, both being the single largest stake in these companies. Among the earliest across borders was General Motors’ acquisition of Germany’s Opel in 1929, after which Opel models were still sold in the UK as “British” Vauxhall. Last year Opel was acquired by France’s Groupe PSA which incorporates Peugeot and Citroen.

The pace and number of cross-border auto acquisitions continue to grow, along with the scale. It is a game for the super cash-rich, making independent national operations unviable while squeezing the prospects of new startups. In ASEAN countries today, mega competition on Level Two between Japanese and Chinese auto firms is shaping up. Even Korean companies are only looking in to see if there is a possible opening.

Sales of individual cars to consumers on Level One continue for all marques, but sales of whole auto companies (Level Two) are the new name of the game. Apart from direct competition between Japanese and Chinese corporations, competition is growing between their locally named subsidiaries – and between rival compatriot firms. The result may see South-East Asian auto companies functioning largely as proxies of parent Chinese and Japanese firms.

SAIC Motor, China’s biggest auto firm which also assembles US and European brands, wants Thailand as the regional production hub for export to other countries. Japanese companies had set that example in this region and are still trying to keep the “flag flying.” Toyota has raised its stake in the Philippines, as has Mitsubishi, with increased investments in factories for larger output. However, higher levels of local technical input are still limited at best.

The international auto acquisitions market has also involved prestigious car design firms. Vietnam’s first car company Vinfast proudly announced engaging Italy’s Pininfarina, which designed Ferrari and Maserati models – and which was bought earlier (76%) by India’s Mahindra.

Developing countries may be smitten by the “national car” bug, while developed countries are more interested in producing sophisticated high-value systems that can be incorporated into all cars: among them, AI for self-driving cars. These high-end components are the real value-added skills in auto production today, rather than basic parts assembly so commonly found in Third World car factories.

Ultimately, the issue is the degree of local content along with the technical input rather than a hidebound obsession with a “national” car. Production and ownership promiscuity across borders means that cars no longer have distinct nationalities.

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Thailand produces some two million cars a year, more than half for export, about as many produced as all the other ASEAN countries combined. It has no national car project since it manufactures only automotive components and assembles cars from other countries. Nonetheless its automobile sector is widely regarded as economically successful, employing more than half a million people and accounting for 10-15% of GDP. Most of the world’s auto parts and automobile manufacturers operate in the country.

A lack of high-end technical inputs for greater value-added has however been limiting to growth. Lately the auto sector pledged to scale up the technical ladder, with attractive government-supported incentives for environmentally clean designs.

Indonesia has ambitious plans for boosting its auto sector, encouraged by rising local demand since 2012 but still hampered by limited exports. It therefore risks mistaking local demand for overseas demand, which has been only 20% of Thailand’s.

Within ASEAN, Indonesia is the biggest country with the biggest population and economy, but its auto sector has not been competitive internationally. Government support through protectionism is no answer. Now the Indonesian auto sector may be facing another challenge – competition from elsewhere in ASEAN such as Vietnam. Its structural inefficiencies remain a persistent problem.

A study by Prof Sadayuki Takii found that the problems include weak or minimal local content and government protection contributing to a lack of competitiveness. The same conditions may be found in other ASEAN countries.

Another reality in the global auto market is how successful companies come from countries with a sizeable domestic market providing healthy competition nationally. Through the years, market discipline made these companies competitive internationally and fit to compete against companies in other countries. Protectionism however works in the opposite direction.

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Indonesian President Joko Widodo has been toying with the idea of an “ASEAN car,” which would bring together engineering skills across this region to produce a competitive world-class item. This desire still exceeds the capacity or the prospect, unfortunately.

Countries in ASEAN still need to get over the lack of substantive technology transfer if they are to acquire the real skills that make the auto sector competitive. Increasing investments by Japanese and Chinese firms at largely parts assembly level are contributing to the problem. But who can say no to immediate investments offering more jobs?

Beyond technology transfers, local players also need to become innovative on their own. That has yet to happen. Another problem to resolve is the growing competition between ASEAN countries. The competing concepts of “regional car” and “national car” are in a zero-sum game.

The Philippines also wants to be the regional auto manufacturing hub within a decade. This national-centric approach, typical of the region, retards regional integration and prospects for the ASEAN Economic Community.

The more likely prospect is to become local outposts for larger Chinese or Japanese firms.

Bunn Nagara is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia.

Bunn Nagara

Bunn Nagara

 

Foreign Policy: The Despot and The Diplomat


June 22, 2018

The Despot and The Diplomat

by Christopher R. Hill

https://www.project-syndicate.org/commentary/diplomacy-with-despots-kim-milosevic-by-christopher-r-hill-2018-06

With his effusive praise of Kim Jong-un’s leadership and North Korea’s economic potential, Donald Trump has abandoned any pretense that the US has a broader set of values to promote. Whether this approach works to advance peace will depend on the diplomacy that follows.

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DENVER – Back in 2005, when I was the United States’ lead negotiator at the six-party talks on North Korea’s nuclear program, I looked at the instructions I received for my first meeting, a Chinese-hosted banquet that included a North Korean delegation. If there was any toasting (not unheard of at Chinese banquets), I was not to join in. Apparently, I was expected to sit there, without touching my glass, glowering with arms folded until everyone else had placed theirs back on the table. Later, when I visited North Korea for the first time, I was instructed not to smile at my hosts. Apparently, I was expected to offer only angry stares.

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Donald Trump has obviously modified those instructions. In fact, with his unending praise of Kim Jong-un’s leadership, his clumsy, impromptu salute of one of Kim’s generals, and his endorsement of all things North Korean (especially the potential for beachfront property development), Trump has all but abandoned any pretense that the US promotes a broader set of values. But while Trump may have overshot the mark, the idea that the US delegation should sit with glasses untouched during a toast also strikes the wrong tone.

In September 1995, during the final month of the Bosnian War, the US delegation to peace negotiations, led by Assistant Secretary of State Richard Holbrooke, arrived in Belgrade for talks with Serbia’s dictator, Slobodan Milošević. According to Milošević, he could not compel the Bosnian Serbs to withdraw their heavy weapons and lift the bloody four-year siege of Sarajevo. He asked Holbrooke to meet with the Bosnian Serb leaders, Radovan Karadžić and Ratko Mladić, both of whom were later convicted of committing war crimes. Holbrooke asked where they were. “Over there in that villa,” Milošević replied. “Can I call for them?”

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Ambassador Richard Hoolbroke–A Giant of American Diplomacy

Read this tribute: http://www.newsweek.com/richard-holbrooke-disappointed-man-69125

Holbrooke hastily brought our delegation together for a quick parley. “Should we meet them?” he asked me. “And if we do, should I shake their hands?” Thinking about the hundreds of thousands of Sarajevans – the many who had been murdered and those facing starvation as a result of the continuing siege – I replied, “Shake their hands and let’s get this over with and go home.” We did. The siege of Sarajevo was lifted the next day.

Whether shaking a hand helps or not, negotiating while shaking a fist has little record of success. During this year’s Pyeongchang Winter Olympics, Vice President Mike Pence was scheduled to meet with the North Korean delegation. Perhaps to cover his back at home, Pence delivered what were then the usual tough-sounding talking points before the meeting. The North Koreans promptly canceled, as if to ask, What would be the point?

During the period I dealt with the six-party talks, I avoided adding my voice to the anti-North Korean invective. I knew that soon – often every other week – I would have to meet them again, and while a display of moxie might help me in Washington, it would not help at the tip of the spear, where it was my job to negotiate away the North Koreans’ nuclear ambitions. There is a big difference between talking tough on television talk shows and sitting across from the North Koreans. Direct diplomacy is a serious means to a serious end. Posturing from a distance is not part of it.

Sometimes body language is hard to get right. As US ambassador to Iraq, the instructions I received from Washington rarely came with any commensurate sense of responsibility for the outcome. I was told that my job included helping the Iraqi opposition rid themselves of then-Prime Minister Nuri al-Maliki. US officials reveled in their amped-up toughness in Washington meeting rooms, like high school athletes banging on the lockers before a big game. But when they actually came out on the field and met with Maliki, they gave him no reason to believe they wanted anything but the best for him.

I would sit in such meetings watching Maliki glance over at me, wondering why I had previously warned him of diminishing US government patience with his autocratic rule and dire consequences. Meanwhile, the visitors from Washington made points that were so subtle and nuanced that Maliki would have needed a decoding device to comprehend their real meaning.

Any diplomat must be purposeful in a negotiation on behalf of his or her country, which means being clear-eyed about the desired outcome and the best way to achieve it. In Singapore, the issue was the North Korean nuclear weapons program. Nothing else really mattered.

Time will tell whether the North Koreans reciprocate Trump’s professed affection for them. Kim gave away little, and was probably stunned when, for the first time ever, a US president accepted at face value North Korea’s supposed anxiety about US joint military exercises with South Korea (which the North Koreans know to be defensive in purpose). That was too large a concession, and, one way or another, it will have to be taken back. More broadly, a framework for peace and security that includes all the directly affected parties – South Korea, Japan, Russia, and China – will need to be designed.

Similarly, North Korea’s human rights record, one of the world’s worst, will have to be taken up in the future – perhaps, as I signaled during the six-party talks, as a component of eventual diplomatic relations. But, for now, the North Korean nuclear program must be at the top of any negotiating agenda.

Whether Trump’s approach actually works with North Korea will depend on the diplomacy that follows the Singapore summit. Over to you, Secretary of State Mike Pompeo.

*Christopher R. Hill, former US Assistant Secretary of State for East Asia, was US Ambassador to Iraq, South Korea, Macedonia, and Poland, a US special envoy for Kosovo, a negotiator of the Dayton Peace Accords, and the chief US negotiator with North Korea from 2005-2009. He is Chief Advisor to the Chancellor for Global Engagement and Professor of the Practice in Diplomacy at the University of Denver, and the author of Outpost.